Levi Strauss forecasts annual profit below estimates as tariffs bite

By Savyata Mishra (Reuters) -Levi Strauss raised its full-year profit forecast on Thursday but fell short of Wall Street expectations owing to costs linked to U.S. import tariffs, sending shares of the denim maker down 7.5% in extended trading. The retailer has taken steps including securing about 70% of its holiday inventory ahead of schedule and raising prices modestly, executives said in a post-earnings call, to cushion the blow from U.S. President Donald Trump's shifting tariff policies. Still, those efforts will not fully offset the pressure, with fourth-quarter gross margin expected to take a 130-basis-point hit. "We probably have brought in a little more inventory than we normally would at this stage," CFO Harmit Singh told Reuters, adding that this was done to protect the holiday quarter. Levi now expects fiscal-year 2025 adjusted profit per share in the range of $1.27 to $1.32, up from its prior forecast of between $1.25 and $1.30 per share. The mid-point is below an estimate of $1.31, according to data compiled by LSEG. The forecast assumes U.S. tariffs will remain at 30% for China and 20% for other countries through the year-end. "Three months ago, investors could squint and imagine denim as tariff-proof, but now it's clear that even jeans can't button up against trade uncertainty, and the company looks less immune than hoped," said Michael Ashley Schulman, CIO at Running Point Capital Advisors. Levi has leaned into full-price sales through its direct-to-consumer channel, broadened its product offerings and kept a tight leash on SKUs, an industry term for inventory. Its merchandise levels jumped 12% in the reported quarter, compared to last year. The company sources the bulk of its products from South Asia, including Bangladesh, Cambodia and Pakistan – countries that face high tariffs under the Trump administration. Still, Levi topped Wall Street estimates for third-quarter sales and profit thanks to strong demand for wide-leg denim bottoms in Europe and the Americas. It reported a 7% rise in net revenue for the quarter ended August 31 to $1.54 billion, beating analysts' estimate of $1.50 billion, according to data compiled by LSEG. Adjusted profit came in at 34 cents per share, compared to an estimate of 31 cents per share. (Reporting by Savyata Mishra in Bengaluru; Editing by Pooja Desai)

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